Options Trader: Friday Morning Ideas

by: Philip Davis

You can't take anything that happens today seriously.

We got out of the market yesterday ahead of this madness but I wouldn't put too much stock in today's moves as they are very likely to come on low volume as trader after trader bolts for the door until maybe 3 guys are left at about 3 pm.

It's a great day for manipulators to step in and flush stops or try to spruce up some charts by forcing some interesting candles or "major breakouts," which is why volume confirmation is always key with charts.

It SHOULD be a good day and perhaps we will break out but we need to just sit back and watch the fun today or, better yet, take the day off and relax - we certainly earned it this week!

Asia was mixed on their last day of trading but they have to work on Monday. Europe is up as the ECB holds rates steady at 3%, should be good for the dollar...

We're going to test all our tops again this morning and, if they hold, we could be off to the races on Tuesday but I'm going back to my mantra: If it's a real rally, I'm not going to miss anything by sitting out the first day.

Oil must fall below $70, below $67 really, in order for industrials to prosper.

Copper must come down below $3 for the building to get back on track.

Gold has to get back below $600 to signal that all is well (or as well as can be expected) on the terror and inflation fronts.

22 Bombs exploded within 5 minutes of each other at commercial banks in Southern Thailand. You may not even hear about it in today's news because we are such a ridiculously self-centered society. Over 1,400 people have been killed in just 2 years as Islamist rebels are trying to drive out the local population (kind of like Afghanistan was/is).

According to the WSJ: "Drive-by shootings targeting police officers, teachers and Buddhist monks are now commonplace in the south." The bombings occurred at 11:30 am and the Thai markets were flat for the day - It's amazing what you can get used to!

We got a good but not great jobs number 128,000 jobs numbers with a slightly higher 4.7% unemployment figure which had better move the markets. Average hourly earnings are up 3.9% so I have decided to make a rare audio commentary.

Can you tell I'm in a holiday mood?


Money making quote of the day: "We're just tickled," said John Karas, Lockheed's vice president for space exploration.

LVS's Shelly Adelson is officially out of control! Now he's going to spend "a couple of Billion," on another Chinese casino on an island near Macau. All this sounds good until you realize Shelligan's Isle has no phone, no lights, no motor cars (or roads), not a single luxury... No wonder the Chinese keep giving him permits, he's going to build all the infrastructure - imagine the permit fees alone! The ultimate cost of all this largess requires Shelly to morph into Thurston Howell as he estimates "Ultimately, it could be $10 billion or $15 billion."

SNY and BMY won a huge judgment banning Apotex from producing Plavix. There was no forced recall though and SNY cut their earnings guidance because they had somehow counted on that? BMY is through the roof, up 7% pre-market while SNY is going nowhere. I will take the Oct. $45s, currently at $1.70 if they come down or the Dec $50s for .80 if they don't.

MHS is a loser on this deal as low-cost generics form the basis of their margin bonus. With a current p/e of 35, anything but a runaway market will punish this company. The October $60 puts are $1.

QCOM can go on with its monopoly said (sort of) a US District Court yesterday. Oct $40s for $1.05 should be having a party on this one!

QQQQ $40s for .30 make a nice but very risky gamble.

Have a very good weekend!

- Phil